I've spent all the time and resources I'm willing to on this project for now. I may complete it at a later date.
It all works except the input voltage from the furnace transformer is too high after rectification (38-40v). The 78M05 I'm using is 35v max and it doesn't tolerate any more. It doesn't seem to damage it, as even after testing as bad on the furnace it works fine on 18v (max on my lab PS) I tried to build a smps replacement based on Roman Black's design, that also worked fine on 18v and blew at least a zener diode on the furnace. I used parts I had on hand, so sometime I will get precise values and try again. For now I'm ordering a snap-disk. Perhaps some of this design may be useful to someone for other purposes. It really sucks, as the controller works fine, I just can't get the voltage regulated to 5v. If you have any ideas feel free to comment.